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Starwood Property Trust Reports Results for Quarter Ended June 30, 2023

Published: 2023-08-03 11:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.54 and Distributable Earnings (DE) of $0.49 per Diluted Share –

– Undepreciated Book Value Per Share Increased to $21.46 –

– Received Repayments of $1.3 Billion in the Quarter and $0.5 Billion Subsequent to Quarter End –

– Issued $381 Million of 2027 Sustainable Convertible Notes Subsequent to Quarter End –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Aug. 3, 2023 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2023. The Company's second quarter 2023 GAAP net income was $168.8 million, and Distributable Earnings (a non-GAAP financial measure) was $157.5 million.

"The Federal Reserve's rapid increase in interest rates to combat inflation has created some collateral damage. Transaction volumes in real estate across the globe have declined precipitously as owners wait for more accommodating financial markets and lenders have cut lending, particularly in the regional banking system as they manage their balance sheets. This environment should provide exceptional lending opportunities for STWD as the underlying real estate markets remain in fundamentally good condition. Inflation is subsiding, and we expect rate increases to stop or reverse in the near term. As we have in past cycles, we have positioned our company conservatively to take advantage of these future compelling opportunities when the windshield becomes less opaque," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"Our unique, diversified, low leverage company has near record liquidity of $1.2 billion and access to significant incremental liquidity.  This provides us with tremendous flexibility to take advantage of opportunities to earn compelling risk adjusted returns as we continue to build our unique, diversified enterprise," added Jeffrey DiModica, President of Starwood Property Trust.

Supplemental Schedules

The Company has published supplemental earnings schedules on its website in order to provide additional disclosure and financial information for the benefit of the Company's stakeholders. Specifically, these materials can be found on the Company's website in the Investor Relations section under "Quarterly Results" at www.starwoodpropertytrust.com.

Webcast and Conference Call Information

The Company will host a live webcast and conference call on Thursday, August 3, 2023, at 10:00 a.m. Eastern Time.  To listen to a live broadcast, access the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. The webcast is available at www.starwoodpropertytrust.com in the Investor Relations section of the website. The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in. 

To Participate via Telephone Conference Call:Dial in at least 15 minutes prior to start time.Domestic: 1-877-407-9039 International: 1-201-689-8470

Conference Call Playback:Domestic: 1-844-512-2921International: 1-412-317-6671Passcode: 13738883The playback can be accessed through August 17, 2023.

About Starwood Property Trust, Inc.

Starwood Property Trust (NYSE: STWD), an affiliate of global private investment firm Starwood Capital Group, is a leading diversified finance company with a core focus on the real estate and infrastructure sectors. As of June 30, 2023, the Company has successfully deployed $95 billion of capital since inception and manages a portfolio of $28 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing, the severity and duration of economic disruption caused by the COVID-19 global pandemic (including the variants and resurgences) and other risks detailed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained herein will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

Additional information can be found on the Company's website at www.starwoodpropertytrust.com.

Contact:Zachary TanenbaumStarwood Property TrustPhone: 203-422-7788Email: ztanenbaum@starwood.com

 

Starwood Property Trust, Inc. and SubsidiariesCondensed Consolidated Statement of Operations by SegmentFor the three months ended June 30, 2023(Amounts in thousands)

Commercial andResidentialLendingSegment

InfrastructureLendingSegment

PropertySegment

Investingand ServicingSegment

Corporate

Subtotal

SecuritizationVIEs

Total

Revenues:

Interest income from loans

$            394,112

$           59,581

$              —

$           2,156

$              —

$      455,849

$                 —

$        455,849

Interest income from investment securities

33,763

165

—

21,603

—

55,531

(36,612)

18,919

Servicing fees

135

—

—

9,410

—

9,545

(3,203)

6,342

Rental income

1,959

—

23,325

7,023

—

32,307

—

32,307

Other revenues

841

310

198

512

391

2,252

—

2,252

Total revenues

430,810

60,056

23,523

40,704

391

555,484

(39,815)

515,669

Costs and expenses:

Management fees

212

—

—

—

30,766

30,978

—

30,978

Interest expense

250,332

35,483

13,469

8,875

55,384

363,543

(211)

363,332

General and administrative

14,565

3,734

993

20,640

3,224

43,156

—

43,156

Acquisition and investment pursuit costs

251

5

—

(111)

—

145

—

145

Costs of rental operations

2,579

—

5,446

3,442

—

11,467

—

11,467

Depreciation and amortization

1,719

27

8,023

2,554

—

12,323

—

12,323

Credit loss provision, net

118,162

3,763

—

—

—

121,925

—

121,925

Other expense

103

—

23

—

—

126

—

126

Total costs and expenses

387,923

43,012

27,954

35,400

89,374

583,663

(211)

583,452

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

54,123

54,123

Change in fair value of servicing rights

—

—

—

(1,651)

—

(1,651)

1,813

162

Change in fair value of investment securities, net

26,444

—

—

(11,001)

—

15,443

(15,455)

(12)

Change in fair value of mortgage loans, net

(65,202)

—

—

11,860

—

(53,342)

—

(53,342)

Income from affordable housing fund investments

—

—

223,823

—

—

223,823

—

223,823

Earnings (loss) from unconsolidated entities

1,482

2,043

—

7,314

—

10,839

(877)

9,962

(Loss) gain on sale of investments and other assets, net

(88)

—

—

4,768

—

4,680

—

4,680

Gain (loss) on derivative financial instruments, net

67,314

197

5,108

3,820

(20,063)

56,376

—

56,376

Foreign currency gain (loss), net

23,261

82

(9)

—

—

23,334

—

23,334

Loss on extinguishment of debt

(1,004)

—

—

(119)

—

(1,123)

—

(1,123)

Other (loss) income, net

(26,625)

6

(5)

—

—

(26,624)

—

(26,624)

Total other income (loss)

25,582

2,328

228,917

14,991

(20,063)

251,755

39,604

291,359

Income (loss) before income taxes

68,469

19,372

224,486

20,295

(109,046)

223,576

—

223,576

Income tax (provision) benefit

(399)

292

—

(1,090)

—

(1,197)

—

(1,197)

Net income (loss)

68,070

19,664

224,486

19,205

(109,046)

222,379

—

222,379

Net income attributable to non-controlling interests

(4)

—

(50,359)

(3,173)

—

(53,536)

—

(53,536)

Net income (loss) attributable to Starwood Property Trust, Inc

$              68,066

$           19,664

$      174,127

$          16,032

$    (109,046)

$      168,843

$                 —

$        168,843

 

Definition of Distributable Earnings

Distributable Earnings, a non-GAAP financial measure, is used to compute the Company's incentive fees to its external manager and is an appropriate supplemental disclosure for a mortgage REIT. For the Company's purposes, Distributable Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due to the Company's external manager, acquisition costs from successful acquisitions, depreciation and amortization of real estate and associated intangibles, any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period and, to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by the Company's external manager and approved by a majority of the Company's independent directors. Refer to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 for additional information regarding Distributable Earnings.

 

Reconciliation of Net Income to Distributable Earnings For the three months ended June 30, 2023(Amounts in thousands except per share data)

Commercial andResidentialLendingSegment

InfrastructureLendingSegment

PropertySegment

Investingand ServicingSegment

Corporate

Total

Net income (loss) attributable to Starwood Property Trust, Inc

$                          68,066

$                          19,664

$                       174,127

$                          16,032

$                     (109,046)

$                       168,843

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,691

—

—

4,691

Non-controlling interests attributable to unrealized gains/losses

—

—

43,063

(1,229)

—

41,834

Non-cash equity compensation expense

2,222

383

78

1,575

5,240

9,498

Management incentive fee

—

—

—

—

3,814

3,814

Acquisition and investment pursuit costs

(59)

—

(82)

(228)

—

(369)

Depreciation and amortization

1,855

18

8,092

2,675

—

12,640

Interest income adjustment for securities

5,937

—

—

7,594

—

13,531

Consolidated income tax provision (benefit) associated with fair value adjustments

399

(292)

—

1,090

—

1,197

Other non-cash items

3

—

395

74

—

472

Reversal of GAAP unrealized and realized (gains) / losses on:

Loans

65,202

—

—

(11,860)

—

53,342

Credit loss provision, net

118,162

3,763

—

—

—

121,925

Securities

(26,444)

—

—

11,001

—

(15,443)

Woodstar Fund investments

—

—

(223,823)

—

—

(223,823)

Derivatives

(67,314)

(197)

(5,108)

(3,820)

20,063

(56,376)

Foreign currency

(23,261)

(82)

9

—

—

(23,334)

Earnings from unconsolidated entities

(1,482)

(2,043)

—

(7,314)

—

(10,839)

Sales of properties

—

—

—

(4,768)

—

(4,768)

Unrealized impairment of properties

23,833

—

—

—

—

23,833

Recognition of Distributable realized gains / (losses) on:

Loans

(621)

—

—

10,522

—

9,901

Realized credit loss

(14,662)

—

—

—

—

(14,662)

Securities

10

—

—

(5,396)

—

(5,386)

Woodstar Fund investments

—

—

14,419

—

—

14,419

Derivatives

30,363

99

5,462

300

(7,996)

28,228

Foreign currency

(1,910)

14

(9)

—

—

(1,905)

Earnings (loss) from unconsolidated entities

1,482

(1,040)

—

5,781

—

6,223

Sales of properties

—

—

—

44

—

44

Distributable Earnings (Loss)

$                       181,781

$                          20,287

$                          21,314

$                          22,073

$                       (87,925)

$                       157,530

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.56

$                              0.06

$                              0.07

$                              0.07

$                            (0.27)

$                              0.49

 

Starwood Property Trust, Inc. and SubsidiariesCondensed Consolidated Statement of Operations by SegmentFor the six months ended June 30, 2023(Amounts in thousands)

Commercial andResidentialLendingSegment

InfrastructureLendingSegment

PropertySegment

Investingand ServicingSegment

Corporate

Subtotal

SecuritizationVIEs

Total

Revenues:

Interest income from loans

$            769,713

$         114,341

$              —

$             2,703

$              —

$      886,757

$                 —

$         886,757

Interest income from investment securities

66,284

1,503

—

44,388

—

112,175

(74,619)

37,556

Servicing fees

294

—

—

19,244

—

19,538

(5,940)

13,598

Rental income

3,940

—

47,020

13,636

—

64,596

—

64,596

Other revenues

1,185

526

301

895

669

3,576

—

3,576

Total revenues

841,416

116,370

47,321

80,866

669

1,086,642

(80,559)

1,006,083

Costs and expenses:

Management fees

430

—

—

—

70,088

70,518

—

70,518

Interest expense

476,725

68,301

26,068

16,304

111,656

699,054

(421)

698,633

General and administrative

26,458

7,698

1,945

40,687

8,476

85,264

—

85,264

Acquisition and investment pursuit costs

458

13

—

(57)

—

414

—

414

Costs of rental operations

5,030

—

10,995

7,108

—

23,133

—

23,133

Depreciation and amortization

3,350

57

16,131

5,201

—

24,739

—

24,739

Credit loss provision, net

148,952

16,167

—

—

—

165,119

—

165,119

Other expense

935

—

23

16

—

974

—

974

Total costs and expenses

662,338

92,236

55,162

69,259

190,220

1,069,215

(421)

1,068,794

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

95,261

95,261

Change in fair value of servicing rights

—

—

—

(1,701)

—

(1,701)

2,167

466

Change in fair value of investment securities, net

41,310

—

—

(25,460)

—

15,850

(15,780)

70

Change in fair value of mortgage loans, net

(56,940)

—

—

12,499

—

(44,441)

—

(44,441)

Income from affordable housing fund investments

—

—

236,788

—

—

236,788

—

236,788

Earnings (loss) from unconsolidated entities

2,421

3,783

—

7,993

—

14,197

(1,510)

12,687

(Loss) gain  on sale of investments and other assets, net

(88)

—

—

4,958

—

4,870

—

4,870

Gain (loss) on derivative financial instruments, net

32,951

146

3,891

353

(13,793)

23,548

—

23,548

Foreign currency gain, net

38,191

157

5

—

—

38,353

—

38,353

Loss on extinguishment of debt

(1,065)

—

—

(119)

—

(1,184)

—

(1,184)

Other (loss) income, net

(29,166)

6

(5)

—

—

(29,165)

—

(29,165)

Total other income (loss)

27,614

4,092

240,679

(1,477)

(13,793)

257,115

80,138

337,253

Income (loss) before income taxes

206,692

28,226

232,838

10,130

(203,344)

274,542

—

274,542

Income tax benefit

6,158

338

—

1,102

—

7,598

—

7,598

Net income (loss)

212,850

28,564

232,838

11,232

(203,344)

282,140

—

282,140

Net income attributable to non-controlling interests

(7)

—

(57,337)

(3,979)

—

(61,323)

—

(61,323)

Net income (loss) attributable to Starwood PropertyTrust, Inc

$            212,843

$           28,564

$      175,501

$             7,253

$    (203,344)

$      220,817

$                 —

$         220,817

 

Reconciliation of Net Income to Distributable Earnings For the six months ended June 30, 2023(Amounts in thousands except per share data)

Commercial andResidentialLendingSegment

InfrastructureLendingSegment

PropertySegment

Investingand ServicingSegment

Corporate

Total

Net income (loss) attributable to Starwood Property Trust, Inc

$         212,843

$           28,564

$         175,501

$             7,253

$       (203,344)

$         220,817

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

9,382

—

—

9,382

Non-controlling interests attributable to unrealized gains/losses

—

—

42,800

(4,027)

—

38,773

Non-cash equity compensation expense

4,309

695

152

3,170

12,108

20,434

Management incentive fee

—

—

—

—

16,179

16,179

Acquisition and investment pursuit costs

(81)

—

(164)

(228)

—

(473)

Depreciation and amortization

3,597

38

16,277

5,446

—

25,358

Interest income adjustment for securities

11,157

—

—

13,014

—

24,171

Extinguishment of debt, net

—

—

—

—

(246)

(246)

Consolidated income tax benefit associated with fair value adjustments

(6,158)

(338)

—

(1,102)

—

(7,598)

Other non-cash items

6

—

747

148

—

901

Reversal of GAAP unrealized and realized (gains) / losses on:

Loans

56,940

—

—

(12,499)

—

44,441

Credit loss provision, net

148,952

16,167

—

—

—

165,119

Securities

(41,310)

—

—

25,460

—

(15,850)

Woodstar Fund investments

—

—

(236,788)

—

—

(236,788)

Derivatives

(32,951)

(146)

(3,891)

(353)

13,793

(23,548)

Foreign currency

(38,191)

(157)

(5)

—

—

(38,353)

Earnings from unconsolidated entities

(2,421)

(3,783)

—

(7,993)

—

(14,197)

Sales of properties

—

—

—

(4,958)

—

(4,958)

Unrealized impairment of properties

23,833

—

—

—

—

23,833

Recognition of Distributable realized gains / (losses) on:

Loans

(2,341)

—

—

12,285

—

9,944

Realized credit loss

(14,662)

—

—

—

—

(14,662)

Securities

10

—

—

(7,472)

—

(7,462)

Woodstar Fund investments

—

—

28,662

—

—

28,662

Derivatives

50,309

190

9,674

189

(14,525)

45,837

Foreign currency

(2,624)

(16)

5

—

—

(2,635)

Earnings (loss) from unconsolidated entities

2,421

(1,136)

—

6,278

—

7,563

Sales of properties

—

—

123

—

123

Distributable Earnings (Loss)

$         373,638

$           40,078

$           42,352

$           34,734

$       (176,035)

$         314,767

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               1.16

$               0.12

$               0.13

$               0.11

$             (0.54)

$               0.98

 

Starwood Property Trust, Inc. and SubsidiariesCondensed Consolidated Balance Sheet by SegmentAs of June 30, 2023(Amounts in thousands)

Commercial andResidentialLendingSegment

InfrastructureLendingSegment

PropertySegment

Investingand ServicingSegment

Corporate

Subtotal

SecuritizationVIEs

Total

Assets:

Cash and cash equivalents

$                   54,876

$                79,411

$                31,769

$                31,614

$             136,259

$             333,929

$                        —

$             333,929

Restricted cash

25,912

23,060

958

4,637

65,716

120,283

—

120,283

Loans held-for-investment, net

15,511,767

2,191,973

—

9,406

—

17,713,146

—

17,713,146

Loans held-for-sale

2,663,034

—

—

111,354

—

2,774,388

—

2,774,388

Investment securities

1,266,437

20,157

—

1,127,934

—

2,414,528

(1,650,411)

764,117

Properties, net

476,847

—

857,354

108,562

—

1,442,763

—

1,442,763

Investments of consolidated affordable housing fund

—

—

1,976,985

—

—

1,976,985

—

1,976,985

Investments in unconsolidated entities

24,815

50,352

—

32,947

—

108,114

(14,463)

93,651

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

14,933

—

27,365

62,825

—

105,123

(36,891)

68,232

Derivative assets

73,909

189

1,073

3,838

—

79,009

—

79,009

Accrued interest receivable

167,752

14,272

1,213

1,551

5,114

189,902

(280)

189,622

Other assets

340,171

19,316

54,319

20,214

55,506

489,526

—

489,526

VIE assets, at fair value

—

—

—

—

—

—

46,864,870

46,864,870

Total Assets

$          20,620,453

$          2,518,139

$          2,951,036

$          1,655,319

$             262,595

$       28,007,542

$       45,162,825

$       73,170,367

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$                131,382

$                20,197

$                13,463

$                29,472

$                73,563

$             268,077

$                        —

$             268,077

Related-party payable

—

—

—

—

27,325

27,325

—

27,325

Dividends payable

—

—

—

—

152,418

152,418

—

152,418

Derivative liabilities

28,278

161

—

—

69,044

97,483

—

97,483

Secured financing agreements, net

10,830,397

974,267

790,880

590,969

1,339,494

14,526,007

(20,960)

14,505,047

Collateralized loan obligations and single asset securitization, net

2,844,610

815,183

—

—

—

3,659,793

—

3,659,793

Unsecured senior notes, net

—

—

—

—

2,083,517

2,083,517

—

2,083,517

VIE liabilities, at fair value

—

—

—

—

—

—

45,183,730

45,183,730

Total Liabilities

13,834,667

1,809,808

804,343

620,441

3,745,361

20,814,620

45,162,770

65,977,390

Temporary Equity: Redeemable non-controlling interests

—

—

408,034

—

—

408,034

—

408,034

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,202

3,202

—

3,202

Additional paid-in capital

1,472,374

578,977

(423,121)

(648,140)

4,862,723

5,842,813

—

5,842,813

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Retained earnings (accumulated deficit)

5,295,942

129,354

1,953,146

1,521,373

(8,210,669)

689,146

—

689,146

Accumulated other comprehensive income

17,355

—

—

—

—

17,355

—

17,355

Total Starwood Property Trust, Inc. Stockholders' Equity

6,785,671

708,331

1,530,025

873,233

(3,482,766)

6,414,494

—

6,414,494

Non-controlling interests in consolidated subsidiaries

115

—

208,634

161,645

—

370,394

55

370,449

Total Permanent Equity

6,785,786

708,331

1,738,659

1,034,878

(3,482,766)

6,784,888

55

6,784,943

Total Liabilities and Equity

$          20,620,453

$          2,518,139

$          2,951,036

$          1,655,319

$             262,595

$       28,007,542

$       45,162,825

$       73,170,367

 

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-june-30-2023-301892493.html

SOURCE Starwood Property Trust, Inc.